mckinsey (3)

With new connectivity technologies unlocking opportunities along the IoT value chain, companies must create detailed plans to harness their potential.

The Internet of Things (IoT)—the network of connected “smart” devices that communicate seamlessly over the Internet—is transforming how we live and work. At farms, wireless IoT sensors can transmit information about soil moisture and nutrients to agricultural experts across the country. IoT alarm systems, equipped with batteries that last for years, provide homeowners with long-term protection. Wearable fitness devices—for both people and pets—can monitor activity levels and provide feedback on heart rate and respiration. Although these applications serve different purposes, they all share one characteristic: dependence on strong connectivity.

IoT stakeholders seeking connectivity solutions include radio and chipset makers, platform vendors, device manufacturers, and companies in various industries that purchase IoT-enabled products, either for their own use or for sale to the public. These companies can now choose from more than 30 different connectivity options with different bandwidth, range, cost, reliability, and network-management features. This wide variety, combined with constantly evolving technology requirements, creates a quandary. If stakeholders bet on one connectivity option and another becomes dominant, their IoT devices, applications, and solutions could quickly become obsolete. If they hesitate to see how the connectivity landscape evolves, they could fall behind more aggressive competitors.

Cellular 5G networks—now being refined—might eventually become a universal solution for IoT connectivity. Although some global telecommunications networks and industrial applications now use 5G, this technology will not be widely available for at least five years, because of high development and deployment costs. With annual economic benefits related to the Internet of Things expected to reach $3.9 trillion to $11.1 trillion by 2025, companies cannot afford to defer their IoT investment until 5G arrives.

To help business leaders identify the connectivity solutions that best meet their current needs, we analyzed 13 sectors, including automotive, manufacturing, construction, and consumer, where IoT applications are common.1In each sector, we focused on connectivity requirements for likely use cases—in other words, the tasks or activities that may be most amenable to IoT solutions. We then identified the most relevant connectivity solutions for each one. In addition, we examined business factors that may influence how the connectivity landscape evolves, as well as the elements of a strong connectivity strategy.

As we all know, approaches to implementing IT infrastructure is changing fast, and has upended the way CIO's, IT managers and software developers, not to mention tech vendors, allocate their IT spend. What will it look like in 2020? McKinsey recently published a blog post looking at 10 Trends that trends that are giving rise to disruption and innovation.

For IoT, McKinsey writes:

Internet of Things business applications are ready for adoption.

McKinsey estimates that business-to-business applications will account for nearly 70 percent of the value that will flow from the Internet of Things (IoT) in the next ten years. According to our 2017 Enterprise IoT Executive Survey, 96 percent of companies expect to increase their IoT spending over the next three years, with some planning to devote as much as a quarter of their IT expenditures to IoT-related capabilities. The most popular use cases for enterprise IoT involve increasing visibility into operations, optimizing operational tasks, or assisting with the development of new business models. The upshift in adoption is even occurring in industries that have traditionally been slow to adopt new technologies, such as oil and gas. The growth of enterprise IoT will vastly increase demand for the compute-and-storage infrastructure, augmenting demand for hyperscale resources and IoT-specific PaaS solutions.

BI Intelligence predicts that more than five billion IoT devices, such as inventory-control and safety-monitoring tools, will require edge solutions by 2020 because they must collect and process data in real time.9Edge solutions allow information processing at the device or gateway level, rather than within the cloud or a data center, reducing both latency and connectivity dependencies. Of the $500 billion in growth expected for IoT through 2020, McKinsey estimates that about 25 percent will be directly related to edge technology. Edge computing will help improve data compression and transfer in the connectivity layer of the technology stack, reducing network bandwidth and making a wider range of IoT applications possible.

IoT practitioners are at the forefront of their company's digital initiatives. But is the rest of your company ready for its digital moment? The expectations are high in the C-Suite for digital transformations, but there's still more talk than action for many companies.

New research by McKinsey Institute suggests only 17% of corporate boards are participating in strategy for big data or digital initiatives. The good news is almost half of big companies have managed to get their CEOs personally involved, up from 23 percent in 2012.

Other findings from the survey include:

The most common hurdle to meeting digital priorities, executives say, is insufficient talent or leadership.

Across the C-Suite, 71% expect that over the next three years, digital trends and initiatives will result in greater top-line revenues for their business, and large shares expect their profitability will grow.

More than half of executives say that, in response to digital, their companies have adapted products, services, and touchpoints to better address customer needs.

Executives most often cite analytics and data science as the area where their organizations have the most pressing needs for digital talent, followed by mobile development and user experience.

Executives who report ample organizational support for adopting risky digital initiatives are twice as likely to work for a high-performing company as executives reporting resistance to risky initiatives due to fear of failure.

Companies’ priorities vary across industries, reflecting key sources of value in each sector: big data is a top priority in healthcare, for example, while automation is a greater focus in manufacturing (see graphic below).

The digital interconnection of billions of devices is today’s most dynamic business opportunity and at present, the Internet of Things remains a wide-open playing field for enterprises and digital strategy. According to the study, buy-in from the C-Suite and aligning with corporate culture and objectives is key to digital success.